Life insurance: A smart investment for uncertain times

By Adrian Paul B. Conoza, Special Features Writer

Uncertainties are inevitable in life — from illnesses, accidents, sudden economic downturns, and, ultimately, death. Not only do these events affect individuals, but more so their families. Such reality has been further stressed when the coronavirus disease 2019 (COVID-19) spread across the globe and suddenly impacted communities, businesses, and households.

These uncertainties, however, can be prepared for by making investments that enable breadwinners to protect their income as well as manage whatever risks that may come in.

For Joseph Mark Y. Ronquillo, senior vice-president and chief of Retail Distribution Division at United Coconut Planters Life Assurance Corp., more known as Cocolife, a wisely picked investment helps consumers secure their earnings as well as allow it to grow.

“In the face of pandemic and other challenges, every Filipino should consider an investment that provides not only an opportunity for your money to grow but will also provide your family income protection in case you, as the breadwinner, are taken out of the picture,” Mr. Ronquillo told BusinessWorld in an e-mail.

Among such investments include life insurance. As local financial literacy website Pesolab noted, life insurance achieves the goals of income protection and risk management. Yet, it goes beyond these purposes as it also helps consumers gain wealth.

“With the rise of products that include cash values or investments, it can be a financial planning strategy to save and grow your money over time,” Pesolab wrote.

This cash value component is what makes life insurance a good investment to embark on, according to financial information portal Investopedia. How it really benefits an insured, however, will depend on whether the policy fits his or her preferences.

“Whether or not life insurance is a good investment for you depends on your individual finances as well as the length you’ll need coverage,” Investopedia stressed in its guide to life insurance.

Choosing wisely

Joseph Mark Y. Ronquillo, senior vice-president and chief of Retail Distribution Division, United Coconut Planters Life Assurance Corp.

With many insurance options to choose from in the market, how can a consumer choose one that is worth investing in?

Mr. Ronquillo advises consumers that their choice should first match their objectives. “The desire to invest should always be driven by what specific needs an investor would like to address such as family income protection, educational fund for the children, retirement fund buildup, and other major goals and purchases,” he said.

Another aspect in which a preferred investment should match with is one’s investment horizon or the total length of time an investor expects to hold a security or investment portfolio. “A match between the choice of investment and investment horizon is a must to avoid problems in the future when you already need to withdraw your money,” Mr. Ronquillo advised.

Lastly, the investment should match with one’s risk appetite or risk tolerance. Basically, low-risk investments (e.g., money market instruments) would normally yield lower returns, while high-risk investments (e.g., equities, stock market) potentially yield higher returns in the long term.

“Every investor should do some kind of introspection before diving into any investments. In terms of investments, they have to also assess whether they are conservative or aggressive or somewhere in between,” Mr. Ronquillo said.

He also noted that clients should always keep abreast of current events as these can affect the current economic situation. By staying informed, they can make informed decisions on what type of investments will fit the current climate.

To keep these investments sound, especially given the current situation, the practice of diversification matters more than ever.

“Since there’s no way to predict how well a particular asset category will perform, setting the right amount of money to different types of investments should be your course of action,” BPI-Philam Life, the bancassurance arm of Philippine American Life and General Insurance Co., Inc. (Philam Life), wrote on its website.

A client should also make sure that debts are settled first so that they do not get in the way of current or new investments. “Your assets may be giving you a good amount of returns, but you won’t be able to maximize your earnings if the interest rate of your credit card bills is slowly chipping away at them,” BPI-Philam Life’s article read.

It helps as well, to regularly consult with financial advisors who can guide one’s investments to the right direction.

As Mr. Ronquillo shared, Cocolife ensures that all clients are given the most tailored advice to suit their specific needs and guide them in making the best decision for them and their family’s well-being.

Various options
Determining one’s objectives, investment horizon, and risk tolerance can greatly help consumers choose the insurance policy that adequately helps them address life’s uncertainties.

Yet, for those who might still find it difficult to determine what insurance product they should choose, Cocolife’s Mr. Ronquillo suggests that a variable life insurance is “ one of the smartest investments there is in the market today,” as it puts together insurance and investment into one policy.

Variable life insurance is defined as a type of permanent life insurance that provides death benefits as well as the ability to build cash funds through an investment component that an insured can manage. Therefore, the insured can control where he can place his investments.

“To put it simply, this is the type of product that can provide you with peace of mind and an opportunity to make your money grow over time,” Mr. Ronquillo said.

The SVP noted that while this kind of insurance product allows the insured to have a protected income, retirement fund, and educational fund, it can also help build wealth for major purchases such as a brand new car, a dream house, and even a dream vacation.

Cocolife’s variable life insurance products are under its FLEXI plans, which are payable in 5, 7, 10, or 20 years and can be configured according to a client’s needs. Products under this line include the FLEXI Investment, FLEXI Protection, FLEXI Retirement, and FLEXI Education plans.

Philam Life, on the other hand, offers a one-pay investment and life insurance plan branded as Money Tree Elite, which ensures guaranteed life insurance coverage of at least 125% of one’s investment.

The firm also offers life insurance plans powered by its wellness program Philam Vitality, which allows clients to enjoy rewards for taking active steps in knowing and improving their health. These products include AIA All-In-One and Family Secure plans.

Philam Life’s other life insurance plans include the Guardian plan and the Family Provider plan. The latter ensures life insurance coverage that does not take a lifetime to pay for, and it also links benefits to investment funds of a client’s choice.